Last time on “Love and Money,” we witnessed the turmoil of one woman, desperate to plan for the future but unwilling to ask her partner the tough questions. We acknowledged and honoured the money child in each of us. We hashed out some things to consider when having “the talk” and we brainstormed some ways to logistically couple our cash.

This week, our story takes another dramatic twist as we dive into the legal aspects of the love and money debate.*

First things, first…

While cohabitation and marriage may look and feel very similar, legally they are not the same.

Once you are legally married the Family Law Act generally considers all matrimonial assets (i.e.: items acquired during the marriage) to be owned and shared equally, regardless of who paid for them. That is because the Act assumes both spouses contributed equally to the marriage, whether in terms of money, child care or home care. This includes (but is certainly not limited to) bank accounts, RRSPs and pension plans. However, certain things such as family heirlooms and personal possessions are typically excluded. A Marriage Contract can be used to override these assumptions, but - without one - 50/50 is the default.

The Act is not as cut and dry when it comes to common law unions. Each person in a common law relationship is generally considered to own 100% of any assets they paid for or which are registered solely in their name, even those acquired while living together. Unless specified in a Cohabitation Agreement (similar to a Marriage Contract), the only shared assets are the ones the couple pay for equally, can prove in court they contributed to or which are contractually registered in both their names. Otherwise, regardless of how long they live together, their stuff stays their stuff.

What about the house?

You might recall our protagonist from part one of this blog series. She had been living in her partner’s home for more than ten years, but had never put her name on the deed. It is not only likely, but legally certain, that if they separate she will walk away only with what she brought into the relationship or has paid for since. That could mean no place to live and a retirement reality that includes renting.

In contrast, if they were married and not merely common law partners, she would have been entitled to half the value of the home automatically, regardless of the fact that he bought it before they began living together and that only his name was on the deed. I think this is a very important distinction for couples to be aware of, especially since most people think that after one year of living together it’s as if you were married anyway. That is simply not the case.

It is Written.

The only thing more important than having the conversation about merging your money (and all the things that money affords you), is writing it all down.

Whether it is in a Marriage Contract (for actual married folks) or a Cohabitation Agreement (for those “married like” folks), these legal documents define the parameters of your financial partnership and ensure everyone is literally on the same page. The best ones not only deal with what happens if you separate, but also define your financial rights and obligations to each other throughout your relationship and even address matters associated with death (and debt). For example, a Cohabitation Agreement for my client could state that, upon her common law partner’s death, ownership of the home would pass to her. Period. Isn’t clarity grand?

Furthermore, if you and your partner start out with a Cohabitation Agreement and you end up married, there is no need to do anything further. If you are happy with the terms of the original contract, it will simply and automatically become your new, legal, Marriage Contract.

Also, Marriage Contracts can be entered into before or after tying the knot (the term “Pre-nup” is really an American thing). However, they must be established in a manner that does not put either party under any undue influence to agree to its terms. In other words, saying “Sign here” seconds before you walk down the aisle does not a binding contract make!

Money Well Spent

In the age of Google, it is certainly not hard to find sample Marriage or Cohabitation Contracts online to help you get started. If you do decide to take a crack at drafting your own, there are four essential things to keep in mind:

1.Must be in writing.

2.Must be signed by both of you.

3.Must be witnessed.

4.Must be open and honest negotiations prior to signing (that includes full financial disclosure).

While it’s not required that a lawyer be used for this process, it is highly recommended. And not just one lawyer. I’d recommend consulting one lawyer each, that way there is no room for potential conflicts. You can still utilize online templates to help you get all your ducks in a row before meeting. If nothing else, you will have a solid starting point and won’t have to talk these things through while on the clock.

I am a huge proponent of the concept, “You get what you pay for.” Skimping at this stage could cost you dearly down the road.

*Full disclosure: I am not a lawyer. While a lawyer was consulted during the preparation of this blog and all facts have been checked for accuracy, every situation is unique. Please discuss yours with a legal professional.